R&D Investment Strategy and Product Line Selection under Uncertain Technology Evolution
Date Issued
2016
Date
2016
Author(s)
Chiu, Chi-Chun
Abstract
The research studies how a company makes its investment of research and development (R&D) and product line selection decisions to maximize its profit under an uncertain evolution trend of technology. The uncertain evolution trend of technology and the amounts of investment of R&D influence the relative technology status of a company. When the environment technology upgrades and the company doesn’t upgrade, the relative technology status of the company will decrease, and vice versa. The relative technology level determines the vertical attribute level of a product such as the resolution of a camera and process ability of central processing unit, etc. Then, the relative technology status constraints the decision of product variety, because the product line consists of the products with different relative product technology levels and the company can’t produce the product which is higher than its relative technology status. The product line selection decision includes pricing and producing which product. The customers purchasing behavior is influenced by the product variety. Consequently, the decisions, investment in R&D and product line selection, are critical to the profit of the company. This research uses nonlinear programming to solve product line selection, Logit model to describe the purchasing behavior of customers, Markov chain to model the uncertain technology evolution trend and dynamic programming model to maximize the expected profit of the company and get the correspondence decisions. Finally, the research implements the model by C# and Mathematica and analysis the results to obtain the insights of management.
Subjects
R&D Investment
Product Line Selection
Dynamic Programming
SDGs
Type
thesis